From Cost Center To Growth Center: Warehousing 2018

FROM COST CENTER TO GROWTH CENTER: WAREHOUSING 2018

From Cost Center To Growth Center:

Warehousing 2018

HOW WAREHOUSING OPERATIONS AND IT PROFESSIONALS ARE RESPONDING TO THE SIGNIFICANT CHANGES AND CHALLENGES FACING THE INDUSTRY OVER THE NEXT FIVE YEARS.

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FROM COST CENTER TO GROWTH CENTER: WAREHOUSING 2018

A Growing Complexity

At its most basic, warehousing is a simple concept. It's about storing materials or goods and filling orders from one end of the supply chain to the other. But in the real world of today, tomorrow and especially five years from now, warehousing is evolving to become anything but simple. Today's warehousing professionals are feeling significant pressures from multiple internal and external sources.

The global recession affected the industry in many ways. In an effort to free up capital, there were major cuts in held inventory, adding capacity was de-prioritized and expansion of existing or construction of new warehouses and distribution centers scaled back or halted altogether. Now, as the economy has begun to grow, warehouse operations are growing again, too. But as they grow, they are also being transformed by a number of issues that go well beyond simple increases in volume and throughput.

Zebra Warehouse Vision Report

Zebra Technologies examined the current warehousing marketplace in our 2013 Warehouse Vision Report, conducted April-May of 2013. The survey asked warehouse IT and operational personnel in the manufacturing, retail, wholesale and third party logistics (3PL) market segments to share their thoughts and plans for addressing the new industry realities over the next five years.

New Warehousing Realities

Today's warehouse professionals face a series of significant changes in the ways warehouses, distribution centers and the entire supply chain operate. More facilities and larger spaces demand high-speed mobile communications virtually everywhere on or off the floor. A virtual across-the-board customer demand for personalization is driving an increase in the number of SKUs leading to increased inventory visibility, accuracy and efficiency needs. New regulations call for more accurate product tracking and tracing. The movement to re-shoring is bringing manufacturing and other business closer to the customer, creating a need for more efficient and effective cost and labor management. Fuel cost volatility impacts logistics and much more. The growth of omnichannel transactions creates the need for increased inventory control, flexibility and faster, more

accurate fulfillment. All these factors contribute to the need to convert warehouses and distribution centers into assets for competitive differentiation.

Cost Center to Growth Center

Responses to the Zebra survey create a snapshot of how warehouse IT and operations professionals across a number of vertical markets view their operations today, and where they see them going by 2018. In aggregate, survey responses reveal a forward-looking new way of viewing the warehouse: no longer as a pure cost center in which operational focus is placed almost exclusively on wringing out inefficiencies and inaccuracies in order picking, but increasingly as a powerful asset that can drive profitable growth for the business with a heightened focus on improving inbound, storage and outbound material handling.

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FROM COST CENTER TO GROWTH CENTER: WAREHOUSING 2018

Warehousing's Five-Year Outlook

Respondents to The 2013 Zebra Warehouse Vision Survey identified fundamental shifts in warehousing in the next five years, including:

MORE OR BIGGER WAREHOUSES

35%

Plan to increase number of warehouses

and DCs

38%

Plan to expand the size of warehouses

and DCs

MULTIMODAL PICKING GROWTH

?2 ?2.5

Use of multimodal voice and scan response will

more than double

Multimodal voice and screen guidance will

grow almost 2.5x

WMS TRENDS SHIFTING

40%

76%

Basic and Legacy WMS use declining

Best-of-Breed and Full-featured WMS use increasing

REAL-TIME CYCLE COUNTS

Plan to take inventory with mobile handheld computers or tablets

67%

INCREASED TASK INTERLEAVING

48%

Plan to practice task interleaving in picking

operations

GROWING NUMBER OF SKUS

54%

Plan on increasing order volumes and number of SKUs

ADDED AUTOMATION

70% 66%

Plan to have more automated

processes

Plan to equip staff with more technology

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FROM COST CENTER TO GROWTH CENTER: WAREHOUSING 2018

REALITY TO VISION:

The Future Of Warehousing

As the global economy continues to recover, the warehousing industry--after a period of marking time while under intense pressure to reduce inventory levels to free up capital--is now in the position of having to quickly keep pace with today's increased fulfillment demands. The industry must also anticipate the areas in which even greater growth will occur in the next five years and beyond. This has vast ramifications for both operations and IT. Of course, before you start planning for the future, your organization must first identify its current status, honestly answering the question, "where are we now?" Once you have a handle on today's reality, you've got to clarify your vision of where you want to be in two, three, four and five years, and make the critical decisions of where to invest, and what types of investments should be considered. Respondents to the survey represent many organizations currently in the midst of making these assessments and decisions. In their responses, they identified some of the most important of today's realities, and shared their visions for the next five years.

WAREHOUSE EXPANSION PLANS OVER NEXT 5 YEARS

51%

66%

70%

33%

39%

45%

54%

54%

7%

3%

1.5%

5%

11%

11%

9.5%

10.7%

ANNUAL INVENTORY

TURNS

EQUIPPING STAFF WITH TECHNOLOGY

AUTOMATION OF PROCESSES

SIZE OF CURRENT LOCATION(S)

NUMBER OF LOCATIONS

NUMBER OF EMPLOYEES

VOLUME OF ITEMS CARRIED

DECREASING INCREASING

NUMBER OF SKUS CARRIED

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REALITY TO VISION:

Top 5 Alignment Opportunities

Today, the reality in many, if not most, warehouse operations is the existence of separate islands of information. The vision for the future is the linkage, integration and consolidation of the Warehouse Management System (WMS) with Enterprise Resource Planning (ERP), the Yard Management System (YMS) and Transportation Management System (TMS). These linkages help remove inefficient information silos, promoting collaboration and increasing the recognition that changes in one process can and will affect others downstream and upstream. For example, changes in packing and staging can affect load plans, trailer drops, routes selection, rates and more. Anticipation of--and response to--these effects is crucial to not only improve warehouse efficiency and productivity, but also to create a more synchronized and agile supply chain.

REALITY

VISION

OPTIMIZE STORAGE AND DISTRIBUTION NETWORK GROWTH

Evaluation and adjustment of the storage and distribution network to reduce total landed costs, enhance customer service and minimize fulfillment costs.

New initiatives to increase the number of warehouse facilities launching twice as fast as expansion plans for existing warehouses; lower transportation costs; shorter delivery times; responding to new supplier and partner locations and requirements. Shifting view of the warehouse and DC from cost center to center with potential for differentiation and growth.

DECREASE LABOR TURNOVER AND TRAINING TIME

Need to decrease the impact of labor turnover and shortages, and reduce the time and cost of training (currently taking 48 hours or more before reaching full productivity).

Reduce average length of training by 44 percent, while at the same time preparing employees for an increase in new procedures they will need to perform as a result of task interleaving. Realizing such a dramatic reduction in training time will require new thinking, new solutions and new technologies.

REDUCE RATE OF RETURNS

Even as the volume of returns grows--due in part to the rise of omnichannel and Internet retailing--retailers and wholesalers expect to reduce the orders resulting in returns by nearly 20%.

The percentage of organizations with reverse logistics programs is expected to almost double; from only 16.7 percent in 2013 to 30 percent by 2018. Redesigning returns management from one of the least automated processes in the warehouse into one in which automated reverse logistics enables faster receiving, return to inventory and customer credit issuance. In addition, reduce the volume of returns caused by internal warehouse problems by consistently operating outbound order fulfillment in a "no fault" mode.

INCREASE AUTOMATION IN INBOUND AND OUTBOUND HANDLING

Need for increased efficiency in inbound and outbound handling processes by requiring more ubiquitous barcoding and increasing supplier requirements and support for more automated processes.

The industry vision is to increase the number of barcoded items received at a warehouse or DC from 67 percent today to 84 percent by 2018. It is also to ensure that supplier and partner processes meet the requirements of, and properly utilize the capabilities of, GS1, GDSN, ASN and RFID, support more highly prioritized picking and storage processes and enable stronger collaboration across the supply chain.

LINK AND INTEGRATE WAREHOUSE SYSTEMS

Desire to consolidate and integrate islands of information in the warehouse: ERP, WMS, YMS, TMS to increase visibility and accuracy in every aspect of supply chain operations. Increase awareness of how changes in one system can affect others.

Unlocking value by providing a single source of accurate information. A strong shift away from homegrown and basic WMS solutions, with 68 percent of organizations moving incrementally to best-of-breed, cloudbased and full-featured WMS systems, and to increasing communications and collaboration across IT and operations.

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FROM COST CENTER TO GROWTH CENTER: WAREHOUSING 2018

Ensuring IT And Operations Alignment

To maximize warehouse and DC productivity, operations and IT leaders must be on the same page in terms of technology systems and business processes. Although we often see at least partial alignment between IT and operations today, in many instances there is still a basic technology divide. It starts with differences in overall assessment of current capabilities and risk perspectives for the future. Survey results demonstrate that today IT often perceives higher levels of WMS integration with other systems than does operations; in addition, IT projects higher incremental integration rates by 2018 than their operations counterparts. Today's IT departments also tend to be more aggressive in setting new standards and deploying new tools to reduce technical risk--and to be more accepting of business risk--than operations, which is usually more risk-averse and focused on running the day-today operations of the warehouse with minimal technical disruption. Bringing the two departments together to share a common vision is one of the most crucial goals moving ahead in the next five years.

Automation and Mechanization

As the industry prepares for the future, it's vital for IT and operations to be aligned in terms of WMS plans, since these systems are the backbone of the entire warehouse/supply chain operation, and the seed from which all automation plans grow. One thing both departments agree on is the need for substantial increases in process automation and mechanization; another is the critical importance of the WMS. Survey responses indicated that while about 40 percent of today's organizations are not currently pursuing increased mechanization to streamline processes, this percentage shrinks to 17 percent by 2018. But if there is agreement on the importance of WMS as the underpinning for greater automation plans, there are other areas of dispute.

The Batch Access Battleground

One of the most glaring differences is a divide in the projected use of batch mode access versus real-time access to the WMS and other relevant business systems. This is especially problematic in the cycle counting process. Historically, cycle counting has been much less automated than picking, but that's about to change.

Although both IT and operations agree that cycle counting needs to become more automated, they seem to be at odds about the best solution for leveraging the WMS for inventory control and validation in the future. IT forecasts a slight increase in the use of mobile batch access to the WMS, while operations has a different view. They predict a movement away from the computer-on-wheels or handheld batch access model, to providing workers with mobile handheld technology with immediate, direct access to the WMS.

Direct WMS Access

The survey indicates that in the next few years, more organizations will begin moving away from manual and batch systems access to full-featured access of the integrated WMS. Going forward, it seems clear that IT and operations will need to come to an agreement on shifting their focus to end user requirements and enhanced worker productivity, with a healthy balance between technical and business risk tradeoffs. To this end, they will need to collaborate in the selection of both an overall solution architecture and the specific mobile computing and advanced data capture devices that will enable workers to streamline virtually every aspect of warehousing operations.

WHERE IT AND OPERATIONS AGREE, 2013-2018

WMS EVOLUTION

SYSTEMS LINKAGE AND INTEGRATION

INCREASED SUPPLIER AND CUSTOMER REQUIREMENTS

EXPANDED AUTOMATION

The use of Warehouse Management Systems continues to evolve, with about 51 percent of respondents planning to use Best of Breed WMS applications or Full Featured WMS systems.

Linking WMS systems with other systems will continue to grow, with 52 percent of respondents expecting to link WMS with ERP by 2018, 35 percent linking it to the Transportation Management System and 20 percent linking it to the Yard Management System.

A growing number of warehouses are planning to increase efficiency by placing more stringent requirements on suppliers. By 2018, for example, 38 percent of respondents will require suppliers to use RFID; 33 percent requiring them to use ASNs; 22 percent requiring compliance with GSDN standards, and 15 percent requiring GS1 standards.

Automation is expanding from the picking process to adjacent materials management and inventory control processes, such as cycle counting. By 2018, only 12 percent of respondents expect to use pen and paper-based processes; 66 percent plan to use handheld mobile computers with real-time access to WMS systems.

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Streamlining The Path To Flawless Fulfillment

It wasn't so long ago that warehousing automation conversations were dominated by picking and replenishment topics. That's no longer the case. As warehouse professionals are facing increasing pressures to deliver more top- and bottom-line value, they are taking a broader view and re-evaluating their capabilities across all their major warehousing processes.

The goal is flawless fulfillment, and it calls for a pragmatic, workflow-driven analysis of how you want to run your warehouse. The technology keys are increased flexibility, automation, integration and real-time access to the WMS with purpose-built, yet adaptable, solutions that can demonstrate lasting value in the face of changing demands. The survey reiterated that order picking and filling remains the top investment priority due to its relatively high costs and greater opportunities for errors. But in today's warehouse environment, the search for increased efficiency, accuracy and productivity also requires a broader, more holistic workflow and process evaluation. Achieving truly flawless fulfillment demands it.

Harder Working Workflows

In pursuit of flawless fulfillment, warehouse professionals are raising the bar for efficiency across every part of their workflow: inbound handling, storage and inventory control, pick and fill and outbound handling. In the past, and largely even today, these tasks were performed in isolation, often using separate teams for each function. This model drives efficiency in specialization, but suffers from some fundamental overlap and duplication of effort, such as when a picking employee walks down an aisle followed by an employee doing cycle counting, each in the same place at the same time, but doing a different job. These situations are leading to innovative new processes--such as task interleaving--aimed at integrating activities across several processes, reducing inefficiencies, improving productivity and decreasing costs. As processes collapse and change, the technology used in performing them must change as well.

KEYS TO FLAWLESS FULFILLMENT: FIVE-YEAR VIEW

INBOUND HANDLING The receiving and put-away functions will grow in importance as the first chronological step in streamlining warehouse operations. Changes include growth in the percent of inbound materials that are barcoded, more stringent demands from suppliers to support the receiving process, and increased use of productivity enhancing activities such as cross docking.

PICK AND FILL As the number one priority for most warehouse operations, pick and fill processes are becoming even more automated and more flexible using efficient new procedures such as task interleaving. Major technology changes include the reduction of scan-only or voiceonly picking and replenishment, giving way to more productive multimodal processes using efficient new handheld and wearable devices.

HOW TASK INTERLEAVING ENHANCES PRODUCTIVITY

As warehouses strive to increase worker efficiency, more organizations are practicing task interleaving to help increase workflow flexibility by cutting down on walk time. With task interleaving, workers no longer have to concentrate on a single task, but are able to support multiple workflows through an ability to perform a range of tasks during each trip. The process begins with an in-depth analysis to determine the optimum workflow and technology decisions for alignment within the new, commingled task workflow. Key to the process is embracing a broader, more intuitive, more flexible hardware and software portfolio.

SURVEY RESPONSES REVEAL THE PROJECTED AMOUNT OF TIME PICKING STAFF PRACTICES TASK INTERLEAVING:

STORAGE AND INVENTORY Paper cycle count processes are on the endangered list as organizations turn to realtime, automated WMS entry, more frequent cadence for inventory validation (instead of just compliance for financial regulations), technology driven efficiencies in cold storage and improved asset tracking and management.

OUTBOUND HANDLING In the new warehousing world, customer satisfaction is seen as a major corporate objective and differentiator. Fast and accurate customer-driven requirements are playing a more important role in the packing, staging, loading and shipping functions, taking advantage of processes such as load optimization and performance monitoring.

30%

2013

48%

2018

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FROM COST CENTER TO GROWTH CENTER: WAREHOUSING 2018

Inbound Handling:

TODAY AND TOMORROW

Receiving and put-away processes can have a domino effect on virtually every other warehouse process. The harsh reality is, receiving and put-away inefficiencies are a significant cause of potential problems upstream and downstream. In response, today's warehousing professionals are currently trying to solve a number of significant inbound handling issues.

TRENDS

2013 2018

66% 83%

INBOUND BARCODED ITEMS

31% 45%

CROSS DOCKING UTILIZATION

21% 38%

RFID SYSTEMS USAGE

16% 30%

REVERSE LOGISTICS IMPLEMENTATION

Today's Realities

Too many shipments arrive with missing or damaged barcodes and other auto-ID technology, causing slow and inaccurate receiving, sortation and put-away. Pallets and cases can be placed in the wrong locations, causing them to become "lost" within the facility. Slowdowns in put-away can cause longer out-of-stock conditions and restrict cash flow. Usage of cross docking is low, resulting in crowded, clogged receiving areas. Inbound items frequently have no data--such as lot numbers or expiration dates--to help in tracking and traceability. Even with increasing return rates, reverse logistics are non-automated and slow, adversely affecting inventory accuracy as well as customer satisfaction.

Tomorrow's Solutions

Survey responses showed a growing commitment to enhancing the receive/ put-away process. Stronger supplier management programs will result in increasing use of Advanced Ship Notices (ASNs), GS1-compliant barcodes and RFID tags for accurate, automated shipment identification. Higher use of cross docking will increase throughput and decrease delivery times without requiring additional storage capacity. When validated and accepted into inventory, inbound materials will be put away in the right locations and linked directly to the WMS. Consistent track and trace solutions will enhance quality control--including overages, shortages and damage (OS&D)--as well as compliance and recall management. Streamlined, automated reverse logistics systems will help the returns process become faster and more accurate.

Technology Enablers

The technology portfolio for inbound handling is growing more innovative. Increased use of ASNs and GS1 standards will help speed receiving and put-away at the pallet and case levels. Handheld and wearable computers, scanners and multimodal devices will speed sortation. Use of tablet computers will enable workers to view a full manifest quickly and easily. Vehicle-mounted mobile computers and long-range imagers provide the foundation for omnidirectional scanning from rolling stock, and support for both 1D and 2D barcodes.

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